Without some form of compression, said Suzuki (through interpreter Mark Cerny), all of the content in Shenmue would have required 50-60 CD-ROMs. As that would have been ... prohibitive to the average consumer, the Shenmue team had to come up with ways to save space, though this sometimes created unexpected results. Like cats walking on two legs.
Shenmue classic game postmortem (GDC 2014)
It was a clever way to give large groups of characters realistic, seemingly individual behavior, but it also led to one of the more interesting bugs during development. One day, the development team discovered there were no citizens to be found in one of the major sections of Yokosuka. Upon investigating, the team learned that the daily schedule had directed every citizen to buy breakfast from the same convenience store – at the same time. The store had become so jam packed with NPCs that they were unable to exit, leaving the streets completely empty.
"We had to increase the size of the automatic door and put a limit on the number of occupants in the store," said Suzuki, though he admitted that the solution resulted in many citizens being late for their virtual jobs.
As for the cats, that was related to the animation system used for non-player characters. Shenmue's NPCs could share motion data, so long as they had similar skeletons. This allowed the team to save space by reusing animation sets for multiple characters. It could, however, result in strange behaviors when it went awry. For example, a man could wind up with a female animation set, walking around like "Marilyn Monroe" as Suzuki put it. The funniest illustration of this problem – or most disturbing, depending on your point of view – was the sight of cats walking the streets of Yokosuka on two legs.